Ten years after the collapse of Lehman Bros., the official economic statistics – the ones that fill news stories, television shows and presidential tweets – say the U.S. economy is fully recovered.
The unemployment rate is lower than it was before the financial crisis began. The stock market has soared. The total combined output of the U.S. economy, also known as gross domestic product, has risen 20 percent since Lehman collapsed. The crisis is over.
Yet it remains the most influential event of the 21st century. It left millions of people – many of whom were already anxious about the economy – feeling much more anxious, if not downright angry. Their frustration has helped create a threat to Western liberal democracy. Far-right political parties are on the rise across Europe. The United States elected a reality-television star who has thrown the presidency into chaos.
Look around, and you can see the lingering effects everywhere – except in the most commonly cited economic statistics. So who are you going to believe: those statistics, or your own eyes?
Over the course of history, financial crises – and the long downturns that follow – have reordered American society in all sorts of ways. One of those ways happens to involve the statistics that the government collects.
The unemployment rate was invented in the 1870s in response to concerns about mass joblessness after the Panic of 1873. The government’s measure of national output, now called GDP, began during the Great Depression. Sen. Robert La Follette, the progressive hero from Wisconsin, introduced the resolution that later led to the measurement of GDP, and great economist Simon Kuznets, later a Nobel laureate, oversaw the first version.
Almost a century later, it is time for a new set of statistics. It’s time for measures that do a better job of capturing the realities of modern American life.
A handful of statistics dominate the public conversation about the economy despite the fact that they provide a misleading portrait of people’s lives. Even worse, the statistics have become more misleading over time.
The main reason is inequality. Statistics that sound as if they describe the broad U.S. economy – like GDP and the Dow Jones industrial average – end up mostly describing the experiences of the affluent.
The stock market, for example, has completely recovered from the financial crisis, and then some. Stocks are now worth almost 60 percent more than when the crisis began in 2007, according to an inflation-adjusted measure from Moody’s Analytics. But wealthy households own the bulk of stocks. Most Americans are much more dependent on their houses. That’s why the net worth of the median household is still about 20 percent lower than it was in early 2007.
The unemployment rate has also become less meaningful than it once was. In recent decades, the number of idle working-age adults has surged. They are not working, not looking for work, not going to school and not taking care of children. Many of them would like to work, but they can’t find a decent-paying job and have given up looking. They are not counted in the official unemployment rate.
Yet the government and the news media continue to act as if the same economic measures that made sense decades ago still make sense today.
Fortunately, there is a movement to change that. A team of academic economists – Gabriel Zucman, Emmanuel Saez and Thomas Piketty (the best-selling author on inequality) – has begun publishing a version of GDP that separates out the share of national income flowing to rich, middle-class and poor.
In the Senate, Democratic senators, including Chuck Schumer, have introduced a bill that would direct the federal government to publish a version of the same data series.
The Labor Department could change the jobs report to give more attention to other numbers. It could also provide more data on wages, rather than only broad averages.
These changes may sound technocratic. They are technocratic. But they can still be important. Over time, they can subtly shift the way the country talks about the economy.
“As someone who advises policymakers, I can tell you there is often this shock: ‘The economy is growing. Why aren’t people feeling it,’” Boushey says. “The answer is: Because they literally aren’t feeling it.”
It’s worth remembering that the current indicators are political creations.
Take the unemployment rate. It dates to 1878, when a former Civil War officer and Massachusetts politician named Carroll D. Wright was running the state’s Bureau of the Statistics of Labor. Wright thought the public had an exaggerated sense of the extent of unemployment after the Panic of 1873.
So Wright asked town assessors and police officers to count the number of people in their area who were out of work. But he added a caveat that he knew would hold down the number. Wright wanted the count to include only adult men who “really want employment.” Not surprisingly, Wright’s count produced a modest number.
Several years later, he was named the first head of the federal Bureau of Labor Statistics. His original methods influenced the way the federal government began calculating unemployment data, and still do to this day.
The whole point of statistics is to describe reality. When a statistic no longer does so, it’s time to find a new one – not to come up with a convoluted rationale that tries to twist reality to fit the statistic.
The notion that our most prominent economic indicators are problematic has been around for a long time. Kuznets himself, the economist who invented GDP as we know it, cautioned people not to confuse it with “economic welfare.” Most famously, Robert F. Kennedy liked to say during his 1968 presidential campaign that GDP measured everything “except that which makes life worthwhile.”
David Leonhardt is a columnist for The New York Times. Reach him c/o The New York Times, Editorial Department, 620 8th Ave., New York, NY 10018.
